Federal Bank's Q3 net profit rises 29% to Rs 522 cr on lower provisions

Net interest income rose by 7% to Rs 1,539 cr

Private sector lender Federal Bank’s net profit rose 29 per cent year-on-year to Rs 522 crore in the third quarter ended December 2021 (Q3 of FY22) on sharp reduction in provisions and marginal improvement in net interest margin.

Net profit was Rs 404 crore in Q3 of FY21. Sequentially, net profit rose by 13.2 per cent from Rs 460 crore in the second quarter ended September 2021.

Its stock closed 4.35 per cent higher at Rs 95.85 per share on the BSE on Tuesday.

Net interest income (NII) rose by seven per cent year-on-year (YoY) to Rs 1,539 crore in Q3FY22 from Rs 1,437 crore in Q3FY21. Sequentially, NII grew by four per cent from Rs 1,480 crore in Q2FY22.

Net Interest Margin rose to 3.27 per cent in Q3 from 3.22 per cent in Q3FY21. Sequentially, there was a two basis point rise in NIM froms 3.20 per cent in Q2 FY22.

The other income for the reporting quarter rose marginally YoY go Rs 484 crore from Rs 475 crore. Sequentially, it declined from Rs 491 crore in the second quarter ended September 2021.

Its advances grew by 12 per cent (YoY) to Rs 1.43 trillion in Q3 as against Rs 1.28 crore in the same quarter of FY21.

According to Reserve Bank of India (RBI) data the bank credit rose by 9.2 per cent (YoY) at the end of December 2021.

Federal Bank’s retail credit rose eight per cent YoY and business banking credit by 11 per cent. As for the gold loan portfolio, it began to grow in third quarter after remaining flat for two quarters of FY22. Gold loans grew by 11.5 per cent YoY to Rs 16,378 crore in December 2021.

Shyam Srinivasan, managing director and chief executive, in a media call, said gold loans would grow at rates higher than 10 per cent in FY22. Also, the pick-up in economy gives maximum opportunity in the mid-market segment.

Federal Bank’s total deposits increased by 8.5 per cent to Rs 1.75 trillion in Q3 of FY22 from Rs 1.61 trillion a year ago.

Provisions and contingencies declined sharply at Rs 213 crore in Q3, from Rs 414 crore in the third quarter of FY21. Sequentially also, provisions were down from Rs 292 crore in Q2 of FY22.

Strong recovery/ upgradation and cash recovery on sale of a large account to Asset Recovery Company, helped bring down credit cost in Q3FY22, bank in investor presentation.

Provision coverage ratio (PCR) stood at 65.8 per cent in December 2021 down from 77.1 per cent a year ago. PCR rose marginally from 65.43 per cent as of September 2021. PCR has remained around 65 per cent for last four quarters.

According to a filing with the BSE, gross non-performing assets (gross NPAs) rose to 3.06 per cent in December 2021 from 2.71 per cent in December 2020. However, it fell from 3.24 per cent in September 2021.

Net NPAs stood at 1.05 per cent in December 2021, up from 0.6 per cent a year ago. But they declined from 1.12 per cent in September 2021.

Its Capital adequacy ratio stood at 14.37 per cent in December 2021.